Bankruptcy Myths

Will Filing Bankruptcy ruin my credit?

Most people mistakenly believe that their credit and their credit report are the same thing. This is wrong. Your credit is your ability to borrow money, while your credit report is a summary of your payment and credit history. Although you may have perfect payment history, if you currently have more bills than you can afford, you have no credit because no one will loan you any more money. Many people discover this when they apply for a consolidation loan. After the bankruptcy, you will have little, if any, debt and you will be a better credit risk to creditors because you will be able to afford the payments on new debt.

I’ll never be able to buy a home if I file bankruptcy.

Wrong. Can you buy one now? Probably not. Bankruptcy will give you the ability to save for a down payment. Also, you will have the income to qualify for a mortgage, something you probably can’t do now because your debts take up all of your disposable income. Most people can qualify for a mortgage within about 2 years after their bankruptcy, and I can put you in contact with lenders that will work with you after the bankruptcy. To qualify for a mortgage, your debt cannot exceed a certain percentage of income per month. If your debt is too high, you will NEVER qualify, EVEN IF YOU HAVE PERFECT PAYMENT HISTORY! That is why “robbing Peter to pay Paul” will never solve your problems. Many people continue to borrow on one card to make payments on another thinking that on-time payments are all that matters. That is totally wrong! You can consult any mortgage lender to verify this!

I can have my bankruptcy filed by a Petition Preparer.

Petition Preparers charge you a fee to prepare and file your bankruptcy. However, Petition Preparers cannot legally give you advice because they are not attorneys. They simply file whatever bankruptcy papers you ask them to file, whether you should do that or not. Anyone can file bankruptcy forms, but without an experienced attorney advising you, you could end up losing thousands of dollars of assets to creditors.My bankruptcy is simple – any Bankruptcy Attorney can file it.

There are simple bankruptcies. But even a “simple” bankruptcy can be complex without adequate preparation and advice. You might think you have a slam dunk case, only to find out that the property you transferred a relative has been disqualified because it was transferred too recently, that the payment you made to a creditor could be considered a “preferential payment” by the bankruptcy trustee, that the retirement plan assets you expected to keep are not from a qualified plan, or that your recent credit card purchases could be considered fraud. If you file bankruptcy without thoroughly reviewing your assets with an experienced Ohio bankruptcy attorney who follows bankruptcy case law closely, you could lose thousands of dollars of assets to the bankruptcy trustee. You could even end up filing the wrong form of bankruptcy protection if your bankruptcy lawyer does not properly analyze exemptions. Bankruptcy case law is mind-boggling complex and there are many gray areas with exemptions.

I don’t need to file bankruptcy because I’m unemployed and my debts are uncollectible.

For some people this statement is true. If you have no assets and no income, your debts are uncollectible. However, you may want to file bankruptcy anyway to improve your credit. And while you may be unemployed now, when you go back to work your creditors could garnish your wages. You should still seek an attorney’s advice concerning if – and when – you should file bankruptcy.

Bankruptcy Basics

David S. Osterman 603-626-5452

Both individuals and businesses may find themselves with more debts than they can pay when due. In such cases, filing for bankruptcy may provide a solution to what seems like an insurmountable problem.

Once considered a last resort, bankruptcy has evolved into an accepted method of resolving serious financial problems. If you are facing serious financial challenges, it is important to seek the counsel of an experienced bankruptcy attorney to determine whether filing under Chapter 13 is right for you.